Vaughn Palmer: Ratepayers be damned, ICBC has become a valuable cash cow for unrepentant Liberals

Vaughn Palmer, Vancouver Sun columnist09.05.2013

The siphoning of ICBC surpluses into general revenue has become a lucrative habit for Victoria, writes Sun columnist Vaughn Palmer. The practice is coming under greater scrutiny due to the insurance corporation’s request for a 4.9% rate increase.

VICTORIA — When the surpluses began to pile up at the Insurance Corp. of B.C. late in the last decade, the company board made a surprising proposal to the B.C. Liberal government.

The money, accumulated as profit on the sale of optional auto insurance, rightly belonged to ICBC ratepayers.

Why not give it back?

The specific proposal was for a one-time cash rebate, targeted to good drivers. But the notion of refunding money on any basis struck the politicians sitting around the cabinet table as heretical.

The Liberals had denounced cash rebates from Crown corporations as a cheap political gimmick when the New Democrats tried it late in their term of office.

Plus they were still wedded to the need to “level the playing field” between government-owned ICBC and its private competitors on optional auto insurance.

Give it back? The Liberals instead decided to keep it for their own purposes.

A bill passed in the 2010 session of the legislature gave the cabinet power to siphon the surpluses — defined as “excess capital” — from the ICBC accounts into the provincial treasury, where it would help pay for government programs.

The first transfer, representing the accumulated surpluses from three previous years, was $576 million. The following year, the cabinet ordered ICBC to deliver up a further $101 million.

Then in 2012, with an election approaching, the Liberals concluded it would be wiser to leave any available surplus from the optional side of the auto insurance business with ICBC, to try to minimize upward pressure on basic rates.

But despite the transfer of $373 million from the optional side to the basic accounts, basic rates were increased by 11 per cent.

That one-time transaction didn’t diminish the Liberal determination to treat ICBC as a cash cow. According to the service plan tabled with this year’s budget, ICBC is scheduled to deliver a further $550 million to the provincial treasury, spread over this year and the next two.

Presuming the cabinet proceeds with its intentions, then over a six-year span, the Liberals will have taken $1.2 billion from ICBC, the equivalent of a $200-million annual levy on auto insurance premiums.

Keep in mind, too, that the province already imposes an official tax of 4.4 per cent on auto insurance premiums, which brought in $165 million last year. Thus the further $200 million-a-year transfer has the effect of more than doubling the premium tax to something like 9.5 per cent. Say “moo,” ratepayers.

But don’t go calling the taking of all that supposedly “excess” capital a tax in the presence of the Liberals. Three years into the cash grab, they’ve worked up a well-rehearsed line about how it represents both sound public policy and a positive boon to taxpayers.

Colin Hansen, who implemented the enabling legislation for the ICBC siphon as finance minister back in 2010, offered his rationale for the move during a speech in the legislature last year.

“On optional insurance, every motorist in B.C. has the option of buying that coverage from ICBC or they can go out to a private provider. They can go to a private insurance company that provides exactly the same coverage, and they can customize that however they want.

“If there is a profit generated from that in the private sector companies, then that actually would result in dividends. For example, it would go back to shareholders. They might be pension funds; they might be private investors that own shares in those private insurance companies,” Hansen continued.

“In the case of ICBC, if they wind up with a profit from their optional insurance coverage, it too should go to the shareholders. Now, who are the shareholders for ICBC? It’s the entire 4.5 million British Columbians.”

Many of them also ICBC ratepayers, of course. But Hansen was offering no apologies for shorting those particular British Columbians.

“Yes, we do from time to time see the profits from ICBC’s optional coverage flow into general revenue of the province. Those dollars are then available to pay for the education programs, the health care programs and all of the other services that all 4.5 million British Columbians depend on being provided.”

Following on Hansen’s rationale, the Liberals continue the siphoning to this day. Nor is that the only example of the provincial government’s creative financial manoeuvrings with the government-owned auto insurance company.

The province also employs ICBC as a collection agency for motor vehicle licensing and registration, driver licensing, and a range of government-imposed fines. Every penny of revenues, which exceeded half a million dollars last year, gets returned to Victoria.

But ICBC is required to absorb the full cost of administration and collection, which ran to $90 million in 2012. The full amount was covered by those same, much-dinged ratepayers on basic insurance. Say “moo” again.

While the Liberals rely on ICBC to pay for non-insurance services and to supplement provincial program funding, the company is currently seeking an increase of almost five per cent in basic rates atop last year’s 11-point jump.

For all the talk of using the ICBC surpluses to reduce spending pressures on provincial programs, customers must be thinking that this year the surpluses would be better used to reduce the pressures on them.

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Vaughn Palmer: Ratepayers be damned, ICBC has become a valuable cash cow for unrepentant Liberals

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